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Three Major Challenges Facing POLs -- Two Down, One To Go
(Part 1 of a 2-part series)

by Dr. Sheila Dunn

Reprinted with Permission from Washington G-2 Reports, Physician Office Testing, December 1996

First Hurdle Down
Despite initial fear and frustration, physician office laboratories (POLs) that chose to keep operating under the CLIA regulatory program have fared well. Most certified labs now admit that CLIA quality standards and inspections are reasonable. Moreover, CLIA fees account for only a few cents per test and the number of waivers for tests commonly performed in POLs has been growing steadily (Physicians Office Testing, Aug. 1996, p.4). One down, two to go!

Second Hurdle Adds Hassles, But...
This year, Medicare began discouraging doctors from ordering large test panels by either downcoding to lower payment or denying payment altogether. Like all other labs, POLs must comply with more stringent medical necessity documentation rules for automated test profiles (CPT 80002-80019); plus, many carriers have limited coverage of many individual tests to specific diagnosis codes. This hassle exists whether tests are run in-office or at a referral lab. Still, Medicare reimbursement of lab tests remains an important part of your revenue mix. Two down, one to go!

The Final Hurdle: Managed Care
POLs across the country report that managed care organizations (MCOs) either slash typical test fees, or worse, steer lab services to "preferred labs" which accept rock-bottom capitated rates in exchange for large volume.

How can you surmount this hurdle? One phone call to the MCO medical director or provider representative will do the trick, right? Wrong. To win this battle, you must marshal the facts, state your case in a way the MCO can understand, be persistent and don't expect to succeed on your first try.

The near-patient (or point-of-care) testing your POL offers has unique value in the healthcare system and to MCOs, but managed care officials need to be persuaded of this. Here are key arguments you can use to prepare your case prior to MCO contract negotiations.

"Set In Stone"?
MCOs often imply that their contract terms are "Take it or leave it!" A good example is an April 25 Aetna memo to mid-Atlantic providers regarding its "preferred vendor" policy. It exempts only four tests (CBC with differential, glucose, quick strep, urinalysis) performed by primary care doctors on a stat basis: "Pursuant to your contract, you have 30 days to advise [us], in writing, if you object...and wish to pursue termination of your contract."

Most providers have, up to now, accepted MCO contract terms without question, but physician practices that do will see their POLs erode in direct proportion to their managed care payer mix. Don't be intimidated--MCO restrictions on POL testing can be negotiated (see box, p. 3)!

The Worth Of Near-Patient Testing
Getting test results during patients' office visits has noticeably improved healthcare. Patients and front-line providers need no convincing; in fact, in support of this value, many POLs offer labor-intensive services like weekend or evening coverage and stat testing (a good point to make to MCOs).

Near-patient testing meets key goals sought by MCOs and the rest of the healthcare system: it lowers costs and increases quality of care, as evidenced by improved patient outcomes and better patient satisfaction. Industries across America know that in today's competitive environment, the key to success is excellent customer service. Healthcare is no exception. Patients may be disappointed with the decline in services mandated by an MCO. Patients who once enjoyed the convenience of on-the-spot test results in your office won't look kindly on a plan that requires them to make an extra trip to a drawing station, another lab or a pharmacy!

If you doubt that testing in ambulatory care settings will be encouraged (and reimbursed) in the near future, consider that in most hospital labs, a significant number of tests have been relocated to patient rooms, emergency rooms and intensive care units. Initially skeptical, hospital-based laboratorians now agree that certain testing at the point of care provides faster turnaround time which expedites treatment, reduces patient morbidity, cuts length of stay and lowers total cost of care per patient.

Why then aren't managed care contracts being written with provisions for office lab payments? Because the lab community has yet to convince MCOs of the worth of near-patient testing. Put yourself in their shoes and assume that, as the MCO contract negotiator, you don't know the difference between a CBC and a glucose test. If shown two fee schedules, one from a mega-lab bidding $2 and $1 respectively, and one from a POL for $12 and $6 respectively, you'd likely pick the seemingly less expensive bid.

While price is a crucial element in MCO contract awards, it's not the only one. Along with economic benefits, managed care plans also realize that in competing for members and meeting quality standards, they must assure key clinical and psychosocial benefits.

Accordingly, you can point out the following:

Clinical benefits: On-site test results are used as an extension of the physical exam to more confidently classify patients as "well" or "sick." For patients, seeing, discussing and understanding these results helps motivate them to comply with a treatment plan. For many tests, when results are delayed, the consequences will undoubtedly be misdiagnoses, improper therapy and increased patient morbidity.

Near-patient testing virtually eliminates preanalytic errors for tests requiring fresh specimens for accurate results (see above table). Specimen loss or mix-up can be a problem with some referral labs. Finally, errors may arise when physicians have difficulty interpreting different reference ranges from a variety of referral labs.

Psychosocial benefits: Patient anxiety is allayed by eliminating 2-3 days of uncertainty about test results. Productivity at home and at work is enhanced if the person is treated during the office visit and his/her clinical condition improves. Travel to specimen drawing stations is a terrible inconvenience for sick patients.

Economic benefits: Though cost per test at the point of care is higher than for mega-labs, overall savings in total cost per patient episode often far exceed the initial expense. Because of prolonged turnaround time, some patients will receive inappropriate or delayed therapy, adding up to additional costs for repeat visits or visits to other providers or emergency treatment facilities.

POL testing saves money by maximizing physicians' efficiency. Lab results that appear 1-2 days after the patient has left the office require providers to recall why the tests were ordered, check results against prior ones, decide how to act on the results, and possibly, discuss the results with the patient. Notifying patients of all test results is now mandatory for most managed care plans. The 10-15 minutes per patient this takes a physician is costly for a practice.

In-office testing streamlines workflow for the office staff, eliminating the need to log, package, track and post results for referred tests, as well as the possibility of error that accompanies each of these steps. Not to mention the hassles associated with up to 10 specimen boxes for each particular health plan!

Time lost from work for health reasons, whether due to less than optimal patient outcomes or from playing telephone tag to get test results, is beginning to draw attention from major MCO customers--namely, employers. As a healthcare information manager for Massachusetts-based phone giant GTE observed: "We're getting smart. We realize that value costs less. GTE spends $600 million yearly on direct healthcare costs. But lost time from work and lower productivity because of health problems costs much more, well over $1 billion a year."

In today's volatile healthcare environment, POL managers must learn myriad new skills, one of which is managed care contract negotiations. The status quo is no longer an option!

>> Go to Part 2: Negotiating With Managed Care: Ready, Aim, Fire!

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Table One: Tests That Are A "Snap" To Negotiate

 Reason Tests
 Specimen lability ESR, CBC with diff, PT, PTT, urine exams, wet preps
 Prompt Rx Tests for infectious diseases (strep, H. pylori, influenza, chlamydia, etc.)
  Tests for drug monitoring (PT, digoxin, theophylline)
  Any test for which a delayed result could cause a more expensive or improper therapy, an unnecessary visit to an expensive specialist or a hospital or emergency department admission

Table Two: Managed Care Limits On POL TestsYou Can Change Their Mind!

Physician office labs in areas where aggressive letter-writing campaigns have been mounted have been successful. For instance, CIGNA HealthCare of Texas Inc. notified providers June 26 that it had modified its capitated agreement with SmithKline Beecham Clinical Laboratories covering all outpatient lab services.

CIGNA noted: "...We have received numerous requests from physicians to permit exceptions to this national agreement in order to enhance medical care to your patients, our members. As a result, we [will] allow participating providers to perform [25] tests in your offices, and reimbursement for these procedures will be paid according to the CIGNA maximum fee schedule in effect at the time of the service."

The list includes specimen collection (paid at $5.50 vs. Medicare's $3) as well as the tests below (selected from the list of 25 for illustrative purposes):

 CPT Code/Test  MCO Fee  Medicare Cap
 80007 / Chem 7  $13.16  $11.29
 80019 / Chem 19  17.79  15.28
 80092 / Thyroid panel  37.80  41.67*
 80162 / **Digoxin  21.36  18.35
 81000 / Urinalysis  5.93  4.37
 81025 / Urine preg  10.18  8.74
 82947-48 / Glucose  6.32  5.43; 4.37
 84132 / Potassium  7.46  6.41
 85023 / = CBC  13.63  11.71
 86588 / Rapid strep  15.21  13.06

* Not capped; carrier fee schedule amt.
** Stat only.
= 85024 (CBC with platelet) not included in the full list; if you perform 85024, you should petition to have it reimbursed by the managed care plan.


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